Second Order Approximation for the Average Marginal Effect of Heckman's Two Step Procedure

Alpaslan Akay () and Elias Tsakas ()

No 239, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: In this paper we discuss the differences between the average marginal effect and the marginal effect of the average individual in sample selection models, estimated by Heckman's two step procedure. We show that the bias that emerges as a consequence of interchanging them, could be very significant, even in the limit. We suggest a computationally cheap approximation method, which corrects the bias in a large extent. We illustrate the implications of our method with an empirical application of earnings assimilation and a small Monte Carlo simulation.

Keywords: Heckman's two step estimator; average marginal effect; marginal effect of the average individual; earnings assimilation (search for similar items in EconPapers)
JEL-codes: C13 C15 J40 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2006-01-19
New Economics Papers: this item is included in nep-ecm
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Forthcoming in Applied Economics.

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